Islamic Bonds Emerge as Mideast Safe Haven
Amid the escalating conflict in the Middle East, Islamic bonds, or Sukuk, are consolidating their status as a safe-haven asset for regional investors, according to Teniz Capital. The firm notes that the Sukuk market is showing resilience, with geopolitical repricing creating a selective entry point for investors in Gulf Cooperation Council (GCC) debt.
The global Sukuk market was valued at over $1.37 trillion in 2025 and is projected to reach over $4.19 trillion by 2034. This growth is driven by increasing demand for Sharia-compliant investments and the expansion of Islamic banking. Unlike conventional bonds which represent a debt obligation, Sukuk are structured as ownership shares in an existing or qualified asset. This asset-backed nature is a key principle of Islamic finance, which prohibits interest-based transactions. Studies suggest that this structure makes Islamic securities more resilient to geopolitical shocks compared to their conventional counterparts. Research indicates that geopolitical risks can predict both the returns and volatility measures of Islamic bonds, highlighting their sensitivity and investor response to regional stability. Within the GCC, Saudi Arabia and the UAE are the dominant issuers of Sukuk. In 2024, Saudi Arabian entities led the region, issuing $49.7 billion in Sukuk, which accounted for 72% of the total in the GCC. This issuance is often tied to strategic national initiatives. Saudi Arabia's Vision 2030, for example, heavily utilizes Sukuk to finance large-scale infrastructure projects and drive its economic diversification agenda. A significant emerging trend is the rise of "green" and "sustainable" Sukuk. These instruments are used to finance environmentally and socially responsible projects, with issuers from the United Arab Emirates accounting for 40% of sustainable Sukuk issuance in 2023.
